By Kate Gibson
NEW YORK (MarketWatch) -- U.S. stocks waffled Friday as the
financial sector slumped on persisting concerns over the
foreclosure crisis, but shares of technology companies climbed on
strong earnings from Google Inc.
In addition, comments from Federal Reserve Chairman Ben Bernanke
reinforced investors' expectations for more stimulus from the
central bank, but some began to question whether the market has
overly priced that in.
The Dow Jones Industrial Average (DJI) fell 40 points, or 0.4%,
to 11,055, in recent trading. General Electric (GE) was the
measure's worst performer, falling 5.1% as the conglomerate's
revenue came in short of Wall Street's expectations.
Financial stocks were also weak as concerns over the foreclosure
crisis persisted. Bank of America Corp. (BAC) fell 4.4% as S&P
Equity Research cut its investment rating on the bank's shares to
hold from strong buy, citing concerns that it may be less prepared
than peers for future mortgage repurchase demands. J.P. Morgan
Chase (JPM) dropped 3%.
"The risk is if there's wrongdoing or things were wrong, they
may be responsible for buying back some of these mortgages which
would put pressure on their earnings," said David Bellantonio, head
of U.S. trading at Instinet. "The weakness in the banks is keeping
pressure on the market."
Still, the tech-heavy Nasdaq Composite Index (RIXF) climbed 0.9%
to 2,457, boosted by an 11% jump in Google (GOOG).The Internet
search giant reported a 32% rise in third-quarter profit, beating
Wall Street estimates.
The Standard & Poor's 500 index (SPX) fell less than a point
to 1,173 as strength in the technology sector offset declines
across financials.
The mixed activity came as Bernanke made a case Friday morning
for new steps by the Fed to boost economic growth. The speech
reinforced expectations for more stimulus measures but prompted
some confusion over whether the market may have been anticipating a
bigger move than the Fed may be planning.
"The market has run for a month on Mr. Bernanke saying he might
provide more liquidity," noted Russell Napier, global strategist at
CLSA. "It travels on expectations but it can't travel forever on
expectations."
Napier said Bernanke's comments indicated the Fed may be
considering measures with less magnitude than the level of support
investors have been pricing in.
"There would appear -- all else being equal -- to be a case for
further action," Bernanke said. But as the Fed contemplates doing
more, Bernanke said officials "will take account of the potential
costs and risks" of pursuing unconventional policies, and anything
that is done will be "contingent on incoming information about the
economic outlook and financial conditions."
Bernanke noted inflation was running below the Fed's objective
of 2% and that the economy was on a course to grow too slowly to
bring down unemployment. Data released Friday showed the seasonally
adjusted consumer price index for September rose by 0.1% from
August while the underlying inflation rate was unchanged in
September.
Among other data released Friday, the Reuters/University of
Michigan consumer sentiment index indicated the consumer mood
darkened in early October, but September retail sales and October
New York manufacturing activity improved more than expected.
In addition, inventories at U.S. businesses rose more than
expected in August, but business sales didn't rise as much as the
inventories.
The U.S. dollar index, (DXY), which measures the U.S. currency
against a basket of six others, edged up 0.2%. Treasurys were
mixed, with the two-year slightly higher, pushing its yield down to
0.36%. The 10-year note (UST10Y) fell, lifting its yield to 2.55%.
Crude-oil futures and gold futures declined.
Shares of Mattel (MAT) fell 7.4% as investors were disappointed
by slumping revenue at the toy maker's Fisher-Price division in the
third quarter.
Seagate Technology PLC (STX) surged 22% after the company said
it has been approached by an unnamed party interested in taking the
storage-drive maker private, a move that comes as interest in the
broad data management sector heats up.